Debt holders in the U.S. are using beefed-up arguments to support their claim on most of the proceeds from the sale of Nortel Network’s Ltd.’s patents, the company’s bankruptcy trial heard Tuesday.

Paul Steep, a lawyer acting for Canadian creditors including about 20,000 former employees, said the idea that Nortel’s U.S. subsidiary has beneficial ownership thanks to licensing arrangements reflects an overly broad interpretation of licensing rights.

“Allocation should be done by way of ownership,” he told a court in Toronto during the second day of opening arguments in a proceeding linked by video with a courtroom in Delaware.

The patent sale netted more than $4.5 billion (U.S.) and the proceeds form the bulk of the $7.3 billion in remaining assets available for ultimate distribution to the bankrupt telecom’s debtors and creditors around the world.

Canadian creditors argue that the parent company legally owned the 6,000 patents and is therefore entitled to the bulk of the sale proceeds.

U.S. bondholders say the U.S. unit held exclusive licenses and should get the biggest share, while lawyers for Nortel’s European units say the patents covering technologies for mobile phones and tablet PCs were largely developed in Europe and sale revenue should accrue there.

Claims on proceeds from the patent auction are the centre piece of the evidentiary portion of the trial, which is expected last several weeks.

The proceeding follows mediation and other failed attempts to divvy up remaining assets of the Ontario-based company. Once North America’s largest telecom equipment maker, Nortel filed for protection from creditors in the U.S. and Europe in 2009 after an acquisition spree built debt and in the wake of an accounting scandal and financial restatements.

At its peak Nortel posted $30 billion in annual revenue, boasted a stock market value of $250 billion (U.S.) and had more than 90,000 employees

The fallen tech giant left tens of thousands of pensioners fighting for a share of its assets, with retirees pitted against hedge funds, governments, former suppliers and other creditors in Europe, the U.S., Africa and the Middle East.

The sides remain deeply divided over the method of allocation of proceeds, while fees for lawyers, accountants, consultants and other professionals have grown to about 10 per cent of the value of Nortel’s estate.

Costs of the Nortel bankruptcy proceedings exceed $1.180 billion, according to figures compiled by Diane Urquhart, an adviser to former Nortel employees.

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